SoftBank to abolish two-year binding mobile phone contracts in Japan

SoftBank Corp. said Friday that from next week it will stop giving its mobile phone users two-year contracts that offer discounts on monthly communication fees but impose substantial penalties for canceling early.

The major mobile phone operator will start offering rate plans from Sept. 13 that do not include cancellation charges or contract terms. Two-year contracts currently offered by the company impose a cancellation fee of ¥9,500.

The move by SoftBank is in response to a new government regulation coming into force in October that requires mobile phone operators to drastically cut cancellation fees on two-year contracts to ¥1,000 or less.

The new regulation is aimed at spurring competition in the industry, by having the country’s three major phone companies — SoftBank, NTT Docomo Inc. and KDDI Corp. — offer services for basic fees that are not bound by a specific time frame. It also aims to help low-cost smartphone operators attract users.

SoftBank introduced the new rate plans after it determined the low cancellation fees would not deter users from quitting mid-contract.

Under the company’s existing two-year contracts, users are allowed to quit without penalty provided they do so in the last month of the existing two-year contract or the first two months of new, automatically renewed two-year contracts.

Customers not currently tied to a two-year contract will be able to shift to the new rate plans and receive the discounts without setting any contract term, SoftBank said.

The company also plans to announce what it will do about two-year contracts currently offered by its low-price brand Y!mobile.

KDDI has said it will keep offering a two-year contract plan with a cancellation charge of ¥1,000, while NTT Docomo has not indicated how it plans to deal with the government’s new regulation.